The Affordable Care Act’s premium subsidies – technically premium tax credits – were designed to help Americans purchase their own health insurance. They became available as of 2014, and for most people who enroll in coverage through the exchange/marketplace, the premium subsidies cover the majority of the monthly premiums.
- The premium subsidies are tax credits, but they can be taken upfront, paid directly to your health insurance company each month, to offset the amount you have to pay in premiums (as opposed to other tax credits, that can only be claimed on a tax return). The premium subsidy is then reconciled on your tax return, to make sure that the correct amount was paid on your behalf.
- As of early 2021, 86% of all marketplace enrollees were receiving premium subsidies. The average full-price premium was $575/month at that point, and the average subsidy covered $486 of that.
- Premium subsidies became larger a few months into 2021, when the American Rescue Plan was enacted:
- The percentage of income that people have to pay for the benchmark (second-lowest-cost Silver) plan was reduced at all income levels for 2021 and 2022.
- The “subsidy cliff” was eliminated for 2021 and 2022.
- Full premium subsidies (and cost-sharing reductions) became available in 2021 for people receiving unemployment compensation.
- To qualify for premium subsidies, you must earn at least 100% of the poverty federal poverty level (FPL). In most states, Medicaid eligibility has been expanded to cover people with income up to 138% of the poverty level, so premium subsidy eligibility starts above that level. There is normally an upper cap of 400% of the poverty level, above which premium subsidies are not available. But the American Rescue Plan eliminated that cap for 2021 and 2022.
- Premium subsidies are available nationwide, but only if you purchase coverage through the exchange/marketplace. In most states, HealthCare.gov is the exchange, but 14 states and DC run their own exchange platforms. Regardless of where you live, coverage purchased outside the exchange is not subsidy-eligible.